One advantage of automatic ﬁscal policy over discretionary ﬁscal policy is that automatic ﬁscal policy
A) makes the actual budget a better reﬂection of the condition of the economy than the standardized budget.
B) does not produce a cyclical deﬁcit, as discretionary policy does.
C) is not subject to the timing problems of discretionary policy.
D) has a greater multiplier effect than discretionary policy.

Question

Quizplus · Accepted Answer

Automatic fiscal policy is not subject to the timing problems of discretionary policy because it is designed to automatically adjust government spending and/or taxes in response to changes in the economy, without the need for Congress or the President to take specific action. This means it can work more quickly and efficiently to stabilize the economy, which is especially important during times of economic crisis. Unlike discretionary fiscal policy, which is subject to the political process and can be delayed or blocked by political disagreements, automatic fiscal policy can be implemented without delay. Therefore, automatic fiscal policy is a more reliable and effective policy tool for stabilizing the economy. A, B, and D are incorrect because they do not accurately describe the advantages of automatic fiscal policy over discretionary fiscal policy.

One Advantage of Automatic ﬁScal Policy Over Discretionary ﬁScal Policy